Failure of a bank to re-present cheques within validity, without justification, constitutes deficiency in service

 Failure of a bank to re-present cheques within validity, without justification, constitutes deficiency in service; compensation must be reasonable and proportionate to indeterminate loss.

Facts

The respondent deposited two cheques (~₹1.06 crore) with the appellant bank within validity. The cheques were initially credited but subsequently returned due to bank strike. Despite having working days available before expiry, the bank failed to re-present the cheques within validity, resulting in them becoming stale.

The respondent claimed deficiency in service, alleging loss including inability to initiate proceedings under s. 138 NI Act, 1881. The NCDRC awarded compensation of 10% of cheque value with interest. The bank appealed.

Issues Framed
(a) Whether failure to timely re-present cheques constituted deficiency in service.
(b) Whether compensation awarded (10%) was reasonable.

Court’s Reasoning

(a) Deficiency in Service
The Court held that banking services fall within “service” under consumer law, and negligence amounts to “deficiency” (Paras 57–59). It observed that a bank acts as an agent and must exercise due diligence:
“A bank… is under an obligation to exercise due diligence… Failure… resulting in the instrument becoming stale… would constitute deficiency” (Para 59).

(b) Application to Facts
The cheques were returned on 30.05.2018; thus, two working days remained (01.06.2018 and 02.06.2018). The bank failed to re-present them without explanation. The defence of strike under s. 75A NI Act was rejected since delay must cease once circumstances end and presentment must occur within “reasonable time” (Paras 54–56, 58).

(c) Effect on Legal Remedies
The Court noted that failure deprived the complainant of the opportunity to initiate proceedings under s. 138 NI Act, though success of such proceedings remained uncertain (Paras 67–69).

(d) Compensation Principles
Relying on s. 73 Contract Act, 1872 and consumer jurisprudence, the Court held compensation must be “fair, reasonable and commensurate” with actual loss (Paras 65–66). Since loss was indeterminate and contingent, awarding 10% of cheque value was excessive (Paras 70–71).

(e) Modification of Compensation
The Court reduced compensation to 6% of cheque value with interest, holding it appropriate in the circumstances (Para 72).

Held
Appeal partly allowed. Finding of deficiency upheld; compensation reduced from 10% to 6% of cheque amount with interest.

Ratio
A bank’s failure to re-present cheques within their validity period without reasonable explanation constitutes deficiency in service, but compensation must be proportionate and cannot be based on speculative or indeterminate loss.Case Details

Citation: 2026 INSC 363
Decided on: 15 April 2026
Case Title: Canara Bank v. Kavita Chowdhary
Court: Supreme Court of India
Bench: Ujjal Bhuyan, J.


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